The Communication Workers Union (CWU) has ruled out any use of the Eircom employee share option plan (ESOP) to compensate staff leaving Eircom following the sale of Eircell.
Any employees transferring to Vodafone as a result of the deal will lose the right to receive shares under the ESOP agreed when Eircom floated in June 1999. Roughly half of the 15 per cent stake given to the staff has been passed on to individual workers and the unions estimate the value of their remaining shares is around £34,600 (€43,964) per current employee. Unions representing Eircom staff - including the CWU - have demanded compensation for staff leaving Eircom and have already obtained a mandate for strike action if the staff are not satisfied with the deal.
One of the terms of the €4.5 billion sale agreed before Christmas is that sufficient Eircell and Eircom employees agree to transfer to Vodafone in order for the mobile business to continue to operate.
The agreement specifies that arrangements will be made so that transferring staff get "substantially the same benefits" as they would have got "as beneficiaries of the Eircom Employee Share Ownership Plan Trustee, were it not for the transfer of the Eircell business from Eircom".
Mr Alfie Kane, the Eircom chief executive, indicated at the time the deal was announced that he hoped the existing ESOP could be restructured in some way that would allow the transferring staff to retain their benefits. Mr Con Scanlon, the general secretary of the CWU said yesterday their legal advice was that the terms of the trust could not be altered to allow individuals who have left Eircom continue to get shares.
Neither will the scheme allow the ESOP to compensate them, he said. Individuals who have left since the inception of the ESOP had to give up their entitlements. Mr Scanlon added that Eircom had not proposed any solution. Either way the cost will be met by Eircom.
A new ESOP would be the most tax effective mechanism and offered the chance of capital appreciation. Vodafone shares are tipped to be one of the best performing telecom shares this year by Deutsche Bank, which yesterday published a review of the sector. The bank gave Vodafone, along with British Telecom, a "strong buy" recommendation. Shares in the mobile group closed up 1.36 per cent at 242-1/2p sterling last night as the rally seen earlier in the week fizzled out. Eircom closed up by the same margin, reflecting the linkage between the two shares. Additional reporting by Reuters
